Some Traders Redeemed Shares of Trump-Tied SPAC at 75% Loss Ahead of Vote

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(Bloomberg) -- Some investors in the blank-check firm taking Donald Trump’s nascent media company public voluntarily took a 75% loss by pulling out of the deal. Most Read from Bloomberg Nearly 5,000 Digital World Acquisition Corp. shares were redeemed for $10.87 each ahead of a vote to approve the special-purpose acquisition company’s deal to take Trump Media & Technology Group public, according to a Friday filing. DWAC, as the SPAC is known, hasn’t traded below the redemption value since the tie-up with Trump Media was announced in October 2021. The stock closed at $42.90 on Wednesday, the redemption deadline, meaning one or more investors swapped shares worth roughly $212,000 for about $54,000. The money came out of the more than $275 million the parent of Trump’s Truth Social platform is set to receive from the SPAC. “Either they had no clue what they were doing — and perhaps thought they could redeem at current market price” or they did it out of spite for the former president, said Matthew Tuttle, the chief executive officer of Tuttle Capital Management. Regardless, redeeming shares at a huge discount to what they trade for on the open market is “as smart as lighting money on fire,” he said. SPAC deals typically offer shareholders the option to swap shares for about $10 — the price many SPACs go public at — plus interest and added sweeteners. The potential to redeem rather than participate in the merger has been a way for SPACs to protect investors from bad deals. Redemption rates have topped 90% on average since the SPAC boom cratered over the past two years. Representatives for DWAC didn’t respond to a request for comment. For DWAC, it’s not the first time investors redeemed shares for a fraction of the money they could’ve sold it for on the Nasdaq. Story continues Some 29,000 shares were redeemed in September when investors extended the deadline for DWAC, according to an earlier filing. In the two years since DWAC’s market debut, about 40,000 shares have been redeemed, according to SPAC Research calculations. The SPAC merger completed on Monday, and the combined company is expected to begin trading on the Nasdaq under the ticker DJT Tuesday. DWAC, which is up 185% this year, is trading at about $50 on Monday. Most Read from Bloomberg Businessweek ©2024 Bloomberg L.P.